West Vancouver’s Abeir Haddad Discusses The Importance of Competitive Advantage
The goal of a business is to make money. Abeir Haddad, a West Vancouver, BC-based entrepreneur and investor, believes that the more you know about how your company makes money, the better positioned you will be to identify and manage any risks that could threaten your profits. The ability to maintain your competitive advantage is a key factor in being successful.
Maintaining a competitive advantage means that you have something that sets you apart from your competitors and keeps customers coming back. It may be a patent, copyright, or trademark that provides the legal basis for your exclusive rights over your product or service.
In other words, every business owner needs to have an understanding of their competitive advantage. But what exactly does this mean?
What is Competitive Advantage?
Competitive advantage is the special something that makes your company different, better, or more successful than competitors. It’s an advantage your company has over others in the marketplace that allows you to make more money.
Two Types of Competitive Advantage
Abeir Haddad understands the two main types of competitive advantage:
Cost Leadership means providing the same product or service as other companies at a lower price. Differentiation is offering a product or service which is unique and cannot be easily duplicated by competitors.
Many factors can contribute to cost leadership and differentiation. These include:
- An industry secret for making things faster, cheaper, or better
- Distribution channels that are exclusive to you
- A licensing agreement that gives you the only right to sell a product or service
- Your culture, values, and way of doing things
Dozens of other things can give you your competitive advantage. Abeir Haddad feels that the trick is finding it. It’s important to note that competitive advantage isn’t something you find and then forget about. It’s something that needs to be nurtured and protected, or it can go away.
Examples of Competitive Advantage
Cost leadership and differentiation can often occur simultaneously and may even complement each other within a given industry. For example, let’s look into what enabled Southwest Airlines to succeed compared to its competitors. Southwest Airlines provides low-cost airfare with no baggage fees, seat assignments, or food for purchase. With little-to-no overhead, Southwest Airlines can provide lower fares while still making a profit. Its business model is built on cost leadership and differentiation (because it offers no-frills service and has a limited number of flight destinations).
Keeping Competitive Advantage: Three Factors
So how do you make sure your competitive advantage stays around? Abeir Haddad believes that there are at least three factors necessary for maintaining competitive advantage:
The first factor is understanding what your competitive advantage is. This may take some work, research, and introspection. It can be helpful to make a list of all the different things that make your company special, then rate each item in terms of importance. The items with the highest scores are probably part of your competitive advantage.
The second factor is keeping your competitive advantage a secret. Secrecy is important because if your competitors know how you’re gaining a leg upon them, they will try to replicate it and match your competitive advantage. Don’t tell anyone about it if you want to keep a competitive advantage for as long as possible!
The third factor is protecting your competitive advantage. This means finding the legal basis for what you do so you can go after anyone who tries to use it without your permission. It also means making sure you’re the only one who has access to that thing, product, or service in question.
For example: If you have a patent on a particular product, nobody besides you and your company is legally allowed to sell it.
Do I Have a Competitive Advantage?
Think about what makes your company special in comparison to competitors. What do customers come back for time and time again? How can you tell if this is part of what creates your competitive advantage?
First, look at those items that received high scores on the list you made. Second, consider whether there is a limited amount of this thing or something easily replicated. If it’s limited and difficult to replicate, you likely have found some of your competitive advantages.
Finally, think about whether these things provide some significant advantage to your company. If yes, this is likely part of your competitive advantage as well.
Final Thoughts on Competitive Advantage
Maintaining a competitive advantage isn’t an easy thing to do, but it’s necessary if you want your business to remain successful. If you’re a business owner, do you know what your competitive advantage is? And how to maintain it?
It might seem like an academic question — who cares about the theory of competitive advantage if we want practical advice on creating and maintaining it.
However, there are two key reasons why understanding why maintaining competitive advantage matters: firstly, without knowing where your company stands in relation to other companies in its industry, you won’t be able to take adequate steps towards keeping up with them; secondly, without understanding the theory behind this concept (and therefore not knowing how best to apply these strategies), your chances of success will be greatly diminished.
So don’t just think about what makes your company different — act on it! Cultivate and protect these things so that they continue to support the growth of your company.